Is Doing A Startup Risky?

One of the things I hear again and again from my friends and peers is: “Justin, I admire your bravery and ability to take the risk and start a company. I could never do that.”

Initially I thought they were right, but my experience has given me a different perspective. What I learned though, is that the risks and sacrifices you have to make will be more than worth it in the end.

In the beginning of a company’s story, you will be forced to sacrifice some nice things and take some great risks in the name of success for your business. Most people see starting a company as a risky endeavor because they automatically assume that there will be failure. If you start a company from the viewpoint, “we have to succeed”, failure is a lot harder because you really don’t want to fail. This attitude will allow you to make different and better decisions because you really don’t want to clean up the mess. This alone will eliminate a lot of risk. Conservative cash utilization, being pragmatic, and working on something you really believe in are some of the results.

Another interesting and often overlooked aspect is that the sacrifices necessary to building a startup aren’t actually that expensive. Here’s my view of some of those sacrifices, and how they can be justified.

Time: By far one of the largest costs. However, when you compare the ROI of your time spend in an education and experience point of view, you will easily be getting 2 times the value by working on a new venture. Many people throw away countless days of their life idling in useless actions, or at jobs they don’t like, doing work that doesn’t have a larger impact on society. As an entrepreneur starting a new company, you could potentially spend years building your business. So my question for those who feel like they have wasted years of their lives, running on the corporate treadmill — if you we’re able to spend those years on any mission or problem you want, what would you pick? If it’s what you are doing now, then great! If not, start a company to meet that need. That way, you will never feel like you “wasted those years away.”

Personal Cash Flow: Money is another big sacrifice. People at different life stages will have varying levels of sacrifice. For example, individuals with spouses, kids, and a house have much more cash burn than a younger single person. The real key is to try to keep costs very low so that you can accumulate cash. This is something I did accidentally. With this bootstrapping mindset you can make career choices not solely based on compensation. In a startup your income will be significantly lower in the beginning. However, your ‘earning potential’ will grow substantially from the experience that often comes from ‘wearing many hats’ at a startup.

Opportunity Cost: When you say yes, it will mean that you will have to say no to other things. In the next few years, what will starting this company mean for you? What will you have to give up? I’m sure the list will be plenty. Of those things, what can be pushed to a later date in life and what do you have to do now?

Spare Time & Other Hobbies: Similar to your business opportunity costs, this sacrifice relates to opportunities within your free time. During the early stages of a startup, your free time gets really pinched and will no doubt be short on supply. Most likely your personal hobbies will fall by the wayside, and you will discover new hobbies that revolve around your new business. This is great, these hobbies will broaden your skill set and will push you to explore all facets of your startup.

These are the risks and sacrifices of starting your own company. So why does this matter? My argument is that if you lose a few of these things, even just temporarily, they will either be easy to get back, or they will come back much stronger after the company gets going. Realizing how much personal value that PerBlue has provided for my life, there is not a day that goes by that I regret starting it. As more time goes by, the more I get out of it- in the form of education, financial, skills, people connections, even travel opportunities!

What I can promise you is that even though you put super boat loads of time and effort into building your business, ultimately the company will give you much more in return!

A version of this post was first published on Jan 17th 2012 via Justin K Beck’s Blog on Life: Risk – Is Starting a Company Risky?.
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